Please find attached our BNIS Fixed Income Daily Report of December 3, 2019.
Bond Market Review (Mon, 2/12)
Another downside movement took place on Indonesia’s bond market early this week. Most of the government bond yields increased by about 2 – 5 bps along the curve, in which, the 10-year Government bond yield climbed 3 bps to 7.12%. The IDR weakened to IDR14,125/USD yesterday, compared to last week’s closing level of IDR14,108 /USD.
The outright trading volume of Government securities was only recorded at IDR9.3 trillion yesterday, declining from Friday’s trading volume of IDR9.4 trillion, and lower than year-to-date average daily trading volume of IDR13.8 trillion. FR0082 and FR0077 were two most actively-traded series in secondary market yesterday, with the trading volume of IDR1.8 trillion and IDR1.6 trillion, respectively. Meanwhile, the outright trading volume of corporate bond was recorded at IDR1.5 trillion yesterday.
Bond Market Preview (Tue, 3/12)
Indonesia’s bond prices are expected to continue its downside movement in near term amid higher external pressure. The global market pressure increased after the US President, Donald Trump, said that he will restore tariff on steel and aluminum imports from Brazil and Argentina. This Trump’s plan raised the global investors’ fears on the trade relations between the US and both countries. Meanwhile, the uncertainties on the US – China trade relations also remained high as there is no clear indication of when the two countries will be able to sign an agreement. Even, the trade tension between the two countries increased after Trump signed legislation supporting protesters in Hong Kong last week. The external pressure also increased following a disappointing US manufacturing data. The US ISM manufacturing data came at 48.1 in November 2019, lower than consensus expectation of 49.2. Increasing global market pressure also dragged the US stock market down last night, where the Dow Jones, S&P 500, and Nasdaq indexes tumbled 0.96%, 0.86%, and 1.12%, respectively. Those sentiments are also expected to add pressure on Indonesia’s bond market, opening a room for further market correction on Indonesian bonds in near term. However, the subdued and manageable inflation, in which November 2019’s CPI came at 0.14% MoM and 3.00% YoY, may become a positive catalyst which will curb the likelihood of significant increases on Indonesia’s bond yields.
Along with the potential of further market correction, then, the short-end and belly series of Government bonds such as FR0053, FR0061, FR0070, FR0077, FR0059, FR0064, and FR0071 can be an alternative choice for investors.
Indonesia Bond Market News
Indonesia’s inflation came at 0.14% MoM and 3.00% YoY in November 2019, lower than Bloomberg consensus expectation of 0.20% MoM and 3.06% YoY. The core inflation was recorded at 3.08% YoY last month, lower than previous month’s figure of 3.20% YoY. November’s inflation was triggered by increasing price on the most of expenditure groups, which was led by Foodstuff (0.37%), Foods, drinks, cigarettes, and tobacco (0.25%) and health category (0.23%). On the flip side, the Transportation, Communication and Financial Services category declined by -0.07% last month. The Foodstuff and Foods, drinks, cigarettes, and tobacco categories were the highest contributors of last month’s inflation with the contribution of 0.07% and 0.04%, respectively, to the November’s inflation. Following last month’s inflation, year-to-date (January – November) inflation has reached 2.37%, lower than average 11-month inflation during the last four years of 2.57%.
PT Bank Mizuho Indonesia issued NCD VII 2019 worth of IDR870 billion. This NCD was issued in two series, i.e., the 3-month series A with the discount rate of 5.65% was issued as much as IDR310.0 billion, and the 12-month series B with the discount rate of 6.05% was sold worth of IDR560.0 billion. Following this issuance, year-to-date, total NCD issuance has reached IDR19.8 trillion, higher than the same period in 2018 of only IDR12.1 trillion. Going forward, banks’ appetite to issue NCD is still expected to remain high along with the possibility of lower JIBOR rate as the room for Bank Indonesia’s benchmark rate cut is still relatively open.
PT Mandala Multifinance will issue shelf registration bond III phase IV 2019 amounting to IDR135.0 billion. This bonds will be issued in two series, i.e., the 370-day series A offering a coupon of 8.50% will be issued as much as IDR110.0 billion, and the 3-year series B offering a coupon of 9.75% will be sold worth of IDR25.0 billion. PEFINDO rating agency has assigned the rating of idA for this bonds. The proceeds from this issuance will be used for company’s working capital. The public offering period will be held on December 16 – 17, 2019, while the bonds will be electronically distributed and listed in IDX on December 20 and 23, 2019, respectively.